Ibrahim Punawala

Ibrahim Punawala of Bank of America questioned Flagstar Bank N.A.'s expense outlook, noting that adjusted expenses appear to be flatlining at the current run rate despite planned hiring. He sought clarification on remaining cost-saving opportunities and the puts and takes that could influence expenses. He also asked about the outlook for non-interest-bearing (NIB) deposit growth, its expected trend as a percentage of the overall mix, and the timeline for new lending relationships to translate into core deposit growth.

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CFO Lee Smith highlighted the significant $800 million year-over-year reduction in non-interest expenses. He identified future cost-saving opportunities in reducing FDIC expenses through liquidity optimization and improved profitability, lowering vendor costs, and achieving efficiencies from technology projects (e.g., data center consolidation). Regarding NIB deposits, Lee Smith expects growth from new C&I relationships (including operating accounts), the private bank's reorganization, and the 360 bank branches. CEO Joseph Otting added that the consolidation of data centers from six to two will yield significant cost reductions.

Ibrahim Punawala inquired about the risk of an 'AI bubble' and its implications for Morgan Stanley's revenue and growth outlook, seeking insights from both investment banking and wealth clients.

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CFO Sharon Yeshaya discussed AI's broad applications for efficiency and productivity across the firm, citing examples like DevGen AI for developer efficiency, Parable for data analysis, and LeadIQ for revenue-driven lead distribution. She emphasized that the firm is still 'scratching the surface' of AI's potential.

Ibrahim Punwala asked CFO Hope Dmuchowski about the necessary steps and baked-in factors to achieve First Horizon's 15% ROCI target for next year. He also inquired about the bank's capital strategy, specifically how the 11% CET1 ratio and 10.75% near-term target relate to M&A opportunities (tuck-in vs. larger deals) and buybacks.

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CFO Hope Dmuchowski outlined three components for achieving the 15% ROCI target: capital normalization (targeting 10.75% near-term, 10-10.5% long-term), credit normalization, and over $100 million in PP&R growth. Chairman, President, and CEO Bryan Jordan confirmed that M&A would largely be tuck-in deals, with organic growth and buybacks being key tools for capital deployment and flexibility.